Document summary
IETA has circulated a draft EC Communication: A Roadmap for Moving to a Low-Carbon Economy in 2050, stating EUA over-supply over Phase-2 of the EU-ETS could be compensated by setting aside 500-800m EUAs from the Phase-3 cap, thus restoring the supply-demand balance. Deutsche Bank estimates the total residual abatement requirement over 2010-20 will be 378Mt such that EUA prices should be determined by the short-run marginal cost SRMC of fuel switching. As a result if a setting-aside policy of 500-800m Phase-3 EUAs were to be implemented over 2010-20 this could result in an average residual abatement requirement of 79-107Mt p.a.